How much profit should I make on a house flip?
Most experienced flippers target a minimum of $25,000–$30,000 net profit per deal, with $40,000+ considered solid. Below $20,000 net usually isn't worth the time, capital risk, and effort. Higher-end markets typically target $50K–$100K+ given the larger price points and risk exposure.
What is the 70% rule in house flipping?
Maximum purchase price should be 70% of ARV minus the rehab budget. So a $250,000 ARV with $40,000 rehab gives a $135,000 maximum purchase. The 30% "spread" covers your profit, holding costs, selling costs, and risk buffer. Conservative flippers use 65%; aggressive markets sometimes accept 75%.
How is ARV (After Repair Value) calculated?
Use 3–5 recent comparable sales — homes that sold within the last 3–6 months in your target neighborhood, with similar square footage, bedrooms, and finish level. Adjust for differences like extra bathrooms, garages, or lot size. The median of comparable sales is your conservative ARV. Many flippers also hire a licensed appraiser for an independent ARV report.
What is annualized ROI?
It converts your deal's return into a yearly rate so you can compare flips of different durations. A 30% return in 4 months annualizes to roughly 130%; a 50% return in 12 months is just 50% annualized. Formula: (1 + ROI)^(12 ÷ hold months) - 1. Flippers often achieve annualized ROIs above 100% on individual deals, even though each individual deal returns 20–40%.
How long does a typical house flip take?
Industry average is 4–6 months from purchase to sale closing. Best case (small cosmetic flip): 2–3 months. Realistic median (kitchen + bathroom rehab): 4–6 months. Tougher cases (full gut, structural work): 8–12+ months. Time on market for the sale typically runs 30–60 days in a normal market, longer in slow seasons or weak markets.
Should I use hard money or conventional financing for flipping?
Hard money pros: fast close (1–2 weeks), interest-only payments, often funds rehab too, less credit-focused. Cons: 10–14% rates, 1–4 points fees, 6–12 month terms. Conventional pros: 7–9% rates, longer terms, lower carrying cost. Cons: 30–60 day close, strict underwriting, harder for distressed properties. Most professional flippers use hard money for speed on distressed deals.
How is house flipping income taxed?
In the US, flipping profits are typically taxed as ordinary income, not capital gains, because the IRS considers it a business activity. If you flip multiple properties per year, you may be classified as a "dealer" and owe self-employment tax (15.3%) on top of income tax. Tax rules vary widely by country. Consult a tax professional — proper structuring can save thousands.
What rehab improvements give the best ROI?
Highest-ROI improvements are typically: paint (interior and exterior), flooring, kitchen and bathroom updates (especially if dated), curb appeal (landscaping, front door, garage door), and any obvious problems (worn carpet, broken fixtures). Avoid: pools, room additions, high-end appliances beyond neighborhood norms, expensive landscaping. The goal is broad buyer appeal, not personal taste.
How much should I budget for unexpected issues?
Always add 15–20% contingency to your rehab budget. Even experienced flippers encounter surprises: hidden water damage, electrical needing replacement, code violations, structural issues found mid-rehab. New flippers should add 25%+ contingency on their first few deals. Underbudgeting is a leading cause of flip failures.
What's the difference between flipping and BRRRR?
Flipping sells the property for a one-time profit; BRRRR keeps the property as a rental and refinances to extract capital. Flipping generates active income (taxed higher); BRRRR generates passive income (taxed lower with depreciation benefits) and builds long-term wealth. Many investors do both — flip in down markets, BRRRR in stable markets.
Can I flip houses with little money?
It's harder than gurus claim. Even with hard money financing (90–100% of purchase, sometimes including rehab), you'll need cash for closing costs, holding costs, contingency reserves, and sometimes 10% down. Plan on $30K–$50K of your own cash for a first flip, plus 6+ months living expenses since the deal may stretch. Partnerships and private money can lower the cash requirement.
How accurate is this house flipping calculator?
The math is precise for your inputs. Real-world accuracy depends on three inputs: ARV (most uncertain), rehab budget (commonly underestimated), and hold time (always longer than planned). Always run the ARV sensitivity table to see profit at lower-than-expected sale prices — that's your downside protection check. Conservative estimates lead to better deal selection.
